Shares in several subsidiaries of Formosa Plastics Group (台塑集團) tumbled by almost the 3.5 percent daily limit yesterday as the death of the group’s founder, Wang Yung-ching (王永慶), gave an extra jolt to already weak investor confidence.
The declines dragged the nation’s benchmark TAIEX index lower as it fell 3.25 percent, primarily taking its cue from a big sell-off on Wall Street and other Asian stock markets.
Formosa Plastics Group is the nation’s most profitable privately owned conglomerate. Most Formosa Plastics companies are constituents of the Taiwan Stock Exchange’s Taiwan 50 Index, while some are industry heavyweights, such as Formosa Plastics Corp (台塑), which has a market value of NT$298 billion, senior strategist at Taiwan International Securities Corp (金鼎證券) Andrew Teng (鄧安瀾) said via telephone yesterday.
“Any uncertainty will shake the confidence of jittery investors and may trigger a selling spree at a time when the macro-economy is weakening,” Teng said.
In trading yesterday, Nan Ya Plastics Corp (南亞塑膠) fell to the 3.5 percent daily limit at NT$44.60, oil refiner Formosa Petrochemical Corp (台塑石化) dropped 3.4 percent to NT$70.50, Formosa Plastics, the nation’s biggest maker of polyvinyl chloride, fell 3.3 percent to NT$52.10 and Nanya Technology Corp (南亞科技), the nation’s second-biggest maker of computer memory chips, ended limit down at NT$7.49.
Last month, Formosa Plastics said it planned to spend NT$15 billion to shore up the share prices of group companies after sagging prices had eaten into shareholders’ interests.
SinoPac Securities Corp (永豐金證券) said Wang’s death would weigh on group share prices in the short term, but would not have much impact on the group’s operations in the long term.
“His death shouldn’t impact Formosa Plastics’ operations given that a succession plan has been in place since 2006 when Wang handed over day-to-day operations at the firm,” SinoPac Securities wrote in a client note yesterday.
Two years ago, Wang officially handed over the running of the company to a seven-member management committee and also appointed his brother, Wang Yung-tsai’s (王永在), elder son William Wong (王文淵) as the group’s chief executive. Wang Yung-ching’s daughter Susan Wang (王瑞華) was appointed deputy chief executive.
Aside from Wong and Susan Wang, the five other members of the committee are Wilfred Wang (王文潮), Wang Jui-yu (王瑞瑜), Yang Chao-lin (楊兆麟), Lee Chih-tsuen (李志村) and Wu Chin-jen (吳欽仁).
The committee holds at least one meeting a month and all important decisions concerning the group’s affiliated companies require the committee’s approval before they are sent to the board of directors.
Teng said Wang Yung-ching’s death would not have a seriously negative influence on the fundamentals of the companies.
Nan Ya Plastics, the world’s biggest processor of plastics for pipes and imitation leather, operates smoothly under the seven-member panel, he said.
But he believes competition among the companies would intensify.
“Every company will become more independent. But this is not necessarily a bad thing,” he said.
Alex Huang (黃國偉), an analyst at Mega International Investment Services (兆豐證券), said the absence of Wang Yung-ching, who served as the group’s spiritual leader, could add more uncertainty in the long term.
It is, however, too early to judge what the impact of any potential changes in management and ownership would be, Huang said.
Standard & Poor’s Ratings Services yesterday left ratings unchanged at A-/stable on four Formosa Plastics companies — Formosa Plastics, Nan Ya Plastics, Formosa Chemicals & Fiber Corp (台灣化纖) and Formosa Petrochemical.
“Although we believe Mr Wang Yung-ching was still highly influential to the group, we do not expect his loss to have an immediate and material effect on the group’s business plan and operations,” it said in a statement released yesterday.
Additional reporting by Jerry Lin
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